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Concentrations of power are generally addressed by a separation of powers. That doesn't require that any one of the powers is wiser or more responsible than the others. It only requires that they consult publicly before acting so that the public is aware of the options and the alternatives. Central banks now have powers, particularly the power of seigniorage, that are better located in Treasuries. At times of severe crisis, Central Banks may be obliged to request that Treasuries deploy their powers of seigniorage, but generally Central Banks should be obliged to work with the common reserves of its banks, and to tailor its regulations so as to ensure that those common reserves suffice in almost all foreseeable circumstances.

This is a very thoughtful proposition in reducing systemic risk. However, implementing an idea requires much more than the idea being correct; especially today where governments act according to the demands of big business and big finance. It is not only that Central Banks can be “captured”, in the west governments are “captured” too and despite the fact that they are “elected”.

“In the decades leading up to the crisis of 2008, there was a broad bipartisan consensus in favor of allowing large financial firms to do as they saw fit.” Absolutely not! The silly consensus was less perceived risk more leverage, more perceived risk less leverage.http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

Simon, overall a good essay, however you provided no solution! Central Bankers who were (and still are) in charge of supervising the markets failed miserably, thus the 2008 financial crisis (and all the other crises in between). The function of Congress or parliaments is to regulate and not to supervise, but there again when there is a disconnect between regulation, supervision, politics and the reality on the ground, one is back to square one. Incidentally, not all central bankers share the same platform (charter) and there are other actors too, such as the IMF, the World Bank, etc. each with their own agenda which might conflict with the Central Bankers overall strategy. In brief, one is better go back to the drawing board, perhaps, to pre 1930!